Petitioners, Lumber Exporters Address US Opposition to Multiple Motions for Judgment

A number of Canadian softwood lumber exporters, on one side of a case, and, on the other, defendant-intervenors led by a domestic trade group, filed in total three briefs supporting their respective motions for judgment (see 2404110063) in a case involving the Commerce Department’s alleged misapplication of the transactions disregarded test to increase the costs of a review’s mandatory respondent (Government of Canada v. United States, CIT Consol. # 23-00187).

The exporters, led by Canfor, the mandatory respondent, claimed in their motion for judgment that Commerce had wrongly conducted the transactions disregarded test to adjust downward the revenue Canfor earned by selling a byproduct of its manufacturing process, woodchips, to affiliated parties. The department compared Canfor’s sales to affiliated parties to those it made to unaffiliated parties to create that equation -- but, on the unaffiliated side, it included a legacy 2012 contract with two unaffiliated paper companies under which Canfor provided woodchips for less than fair market value, Canfor claimed.

The United States said in its reply brief to both parties (see 2408230020) that the 2012 contract allowed “periodic adjustment to the wood chip prices by reference to industry publications,” meaning the prices under it weren’t necessarily unrepresentative of market prices; but this conclusion wasn’t demonstrated by the record, Canfor said.

A comparison of the prices of the woodchips Canfor sold under that 2012 contract during that period of review with other prices between nonaffiliates indicated that the woodchips sold under the 2012 contract were “not reflective of market prices during” that period of review.

“Defendant and the COALITION compound their misunderstanding of the supply agreement by omitting any discussion of the actual prices that Commerce considered,” it said.

Canfor’s chips were sold at lower than market price because the contract provision that the U.S. pointed to, claiming it allowed period price adjustments, didn’t come into effect until after the period of review, Canfor said. In a heavily redacted section of the public version of its brief, it also discussed several other contract provisions in dispute

The respondent also argued that Commerce had found a mere “bookkeeping convenience” to be a transaction between Canfor’s affiliates at less than fair market value. Specifically, the U.S. claimed that a Canfor affiliate, Canfor Pulp Products Inc., was providing a service for Canfor’s PG Sawmill when it paid the collective electric bill of “four Canfor entities on adjacent land” after receiving PG Sawmill’s own electricity payment.

The government claimed that Commerce still applies the transactions disregarded test when an affiliate is serving only as a payment intermediary and document handler, but “Commerce has declined to apply the transactions disregard rule in similar circumstances, such as when the record shows that the affiliate acts only as a purchase agent and is not the supplier of the input,” Canfor said.

It claimed that the department treated Canfor Pulp Products as a reseller of electricity to PG Sawmill, adding the affiliate’s selling, general and administrative expenses to PG Sawmill’s electricity costs. But Canfor Pulp Products can’t provide electricity to PG Sawmill -- the utility company transmits electricity to all four Canfor entities using a single line.

“In other words, there is no quid pro quo that renders CPPI a reseller,” it said.

The Canadian exporters also discussed a long-controversial topic, Commerce’s application of the Cohen’s d test, in a third brief.

Meanwhile, defendant intervenors led by the Committee Overseeing Action for Lumber International Trade Investigations or Negotiation (COALITION) said in their own motion for judgment, and continued to say in their Oct. 10 brief, that Commerce had underestimated the exporters’ AD margin by failing to deduct the respondents’ countervailing duty costs from their export prices.

The U.S. defended Commerce’s refusal to do so, saying that countervailing duties weren’t “costs” and that treating them as such went against both statute and prior court rulings. In response, the petitioner group fell back on Loper Bright.

It again argued that the department was misinterpreting the statute. CVD costs are both “‘included in’ the price used to establish” export price and “‘incident to bringing the subject merchandise from the original place of shipment,’” it said, citing the language of the law. And including countervailing duties in respondents’ costs calculations was the only way to make an accurate comparison between their U.S. and home market prices, it claimed.

It also noted that, though the Court of International Trade has ruled on the issue, the U.S. Court of Appeals for the Federal Circuit hasn't.

COALITION also alleged Commerce erroneously included in its AD calculation the general and administrative costs of Canfor as a whole, when it should have relied only on the G&A costs of Canadian Forest Products -- the entity, COALITION claimed, that actually produced the subject merchandise. The U.S. had rejected the argument wholesale, saying that Canfor is a parent company that incurred G&A expenses “related to production and sales of softwood lumber” that wouldn’t show up in the financial information of Canadian Forest Products.

The petitioner argued that Commerce’s questionnaire tells respondents to include the G&A expenses incurred by a parent company on that respondent’s behalf.